Essays in applied microeconomics

Abstract

This thesis addresses three questions using the same tool of microeconomic modelling. In the first chapter (joint with Emily Farchy), I examine the role of individual’s decision to acquire broad versus specialist knowledge. I show that a worker can afford to become more specialized on a narrower set of skills by relying on other workers for missing skills. This yields a new explanation of the urban wage premium, and in particular of why workers tend to be more productive in bigger cities, where the existence of better networks of workers provides more incentives to acquire specialized skills. This conclusion matches well established empirical findings on workers’ productivity in the literature.
In the second chapter, I look at the dynamics of human capital acquisition over time and show the possibility of what I term a social poverty trap. Namely, parents who do not instil in their offspring the culture of social cooperation (modeled as a higher discount rate) deny them the possibility of future good outcomes; in turn, this new generation will be unable to invest resources in the socialization of their offspring, and so on. This creates a poverty trap where some dynasties are stuck in a bad equilibrium.
In the last chapter, I model political parties campaigning on different issues to voters with limited attention. I assume that the relative salience of the different issues depend on how much time parties devote to each issue. In this setting, I show that campaigning might result in excessive focus on divisive issues (for political differentiation) to the detriment of Pareto-improving ones.